Every time I receive assigned shares from a cash-secured put (CSP), there's an instinctive thought that the trade has failed. However, this isn't the case; the trade performed its function as intended. The emotional response can lead to hasty decisions if not carefully considered. Here’s a structured approach I follow the morning after an assignment:

  1. Evaluate Your Desire to Own the Stock: The first question to ask is whether you want to own the stock at your adjusted cost basis, which is the strike price minus the premium received. If the answer is no, the most straightforward action is to sell the shares, accepting the loss instead of hastily selling a covered call to try and recoup losses. I've found that chasing covered call premiums on stocks I didn't actually want led to worse outcomes than a clean loss.

  2. Check the Next Earnings Date: If you confirm that you want to hold the stock, the next consideration is the upcoming earnings date. If this falls within your preferred days to expiration (DTE) window, you might choose to skip writing a call this cycle or opt for a strike that is further out-of-the-money (OTM). This prevents being called away right before a significant event and avoids the impact of implied volatility (IV) crush on a covered call.

  3. Assess Current Implied Volatility (IV) Rank: It's crucial to look at the current IV rank for the stock, rather than the rank at the time of the original put sale. If the IV has plummeted since the assignment—often a result of an earnings-related dip—the premium from a covered call may not justify the potential risks. Sometimes, the best decision is simply to hold the shares unencumbered for a while, waiting for IV to stabilize.

  4. Consider Rolling Instead of Accepting Assignment: This is an option I underutilized in the past. If I'm not ready to own the shares, rolling the put option out (and sometimes down) for a credit can be more advantageous than taking assignment and then deciding I don't want the shares. Early on, I mistakenly viewed assignment as unavoidable once the option was in the money (ITM), overlooking the rolling option that was readily available.

Having a written decision-making framework has significantly improved my post-assignment responses, making them more thoughtful rather than reactive. I’m curious to hear what strategies others employ when deciding whether to hold, sell, or roll their positions.